Avon in Global Markets in 2009 - Case Study Example

Avon in global markets in 2009 Managing and developing a global workforce Table of contents Introduction 2 Methodology 3 Discussions 3 Part 1. Avon's international human resource practices 3 Part 2. Dealing with culturally diverse workforces 9 Part 3. Impact of social institutions in India to Avon’s IHRD plan in India 14 Conclusion 16 Annex 18 References 20 Avon in global markets in 2009 Managing and developing a global workforce Introduction Avon is planning to expand its operations in India using the same formula of direct selling approach in India. Avon has been fairly successful in doing business with other countries using this business model. However, it should be kept in mind that India has a different culture than those prevailing in the United States and what is acceptable here may not be adaptable in India. This study is an exploratory case study research on international resource practices in relation to the proposed expansion of Avon to India. In this plan, there is a need to know the host adaptation in recruitment selection practices in the selected country. It is imperative also to find out how training and development techniques are used in different countries to establish position of Avon on this. Avon is operating in USA, United Kingdom and South Africa, and soon in India, and in planning, it is important that to know if there are national and institutional contexts or external environment that will affect Avon. In globalization, Avon deals with diversity of cultures, and it can help if Avon gets information on how cross cultural communication affects operation. On this, analysis to national cultural differences in preferred leadership traits, effective leadership behaviors, influence tactics and subordinate expectations will be developed. The objective of this research is to find out the cross-culture differences of the workforces that need to be considered for Avon’s expansion in India. Methodology An exploratory case study is done as method of the research because it provides a model wherein every aspect of the topic is analyzed to seek patterns and causes for behavior. A case analysis allows the researcher to gather more information to answer the hypotheses and questions developed and mostly answer why or how. It will be a retrospective type of analysis that involves at looking on historical information to determine factors that may be related to the issues needed by Avon in its plan to enter India. The research might start with an outcome, such as cultural diversity and then backwards at information that might link cultural diversity to the needs of the study. Gathering of information will be done through published studies, data and documents, and archival records such as census and survey records. Discussions Part 1. Avon's international human resource practices  1. Avon's Strategic International Human Resources practices regarding the development of a global management cadre, host country nationals and building company associates and independent representatives in host countries. Avon Products was established in 1886, and today is proud to celebrate its 127th anniversary. Their story of recruitment, hiring and employment is dramatically different from the traditional methods employed by most of companies in U.S. When they started with their direct-selling model of marketing, few would ever imagine that today, the idea inspired by its founder, David H. McConnell, of empowering women of financial independence, would benefit 6 million AVON representatives all over the world. Avon Products, according to its history, is able to survive two world wars, the great depression, and economic downturns, but these sad pictures of history, only strengthened the company to take this as an opportunity to generate the power of women to survive. AVON conducts business in six geographical locations: Latin America, North America, Central & Eastern Europe, Western Europe, Middle East & Africa, Asia Pacific and Chin. It has sales operations in 65 countries and territories, including US, and distributes products in 40 more. AVON sells products to ultimate consumers through its 6 million product representatives. AVON representatives are independent contractors and not considered employees of the company. Representatives keep their earnings by purchasing AVON products at a discounted price published in the brochure then afterwards sell them to the final consumer. A representative contacts the customer selling the products directly through a brochure which highlights AVON products for sale. From time to time, AVON launches new products and sales campaign which is done regularly, or about every 2 weeks in US and every 4 weeks for overseas market. AVON calls the representative and the brochure its store by which its product is sold (See Avon case sstudy). Direct selling of AVON works this way. A representative forwards an order to AVON thru e-mail, internet, fax or telephone. The order is processed and assembled at a distribution center and delivered to the representative through the local of national delivery services. The representative delivers the merchandise to the customer and collects the payment for her account. The representative then gets a refund from the full price paid for the good. AVON also uses an electronic website ordering system wherein representatives can manage their accounts. The electronic systems allow order transmission, order tracking, payment and two-way communication with the company. Representatives can build their own business through personalized pages and be able to sell a complete line of products on-line. Up-to-the minute news and self-paced on-line training are provided by the company on line.(Avon Annual Report 2009) Host country nationals. A host country national is an employee who is a citizen of the country in which the organization branch is located, but the main office of the organization is found in another country (US Legal.com.) Hiring of HCN may be a good proposition for multinationals, but barriers to hiring are that such employee may not understand the parent company’s culture, and determining which country’s labor laws and tax laws are applicable. As Avon employs globalization as a marketing strategy, it has established decentralized branches, satellite stores and independent retail operators. Avon also opens branches, licensed beauty centers and retail outlets as a complementary means to direct selling. As in polycentric approach, Avon hires the host country nationals to manage subsidiary and gives each subsidiary some autonomy in the decision process. Avon believes in polycentric model, that hiring of HCN eliminates language barriers, and there is no need for cultural and language training which is usually very expensive and takes a long time (O’Connell,n.d.). Avon thinks that in HCN, coaching its sales representatives will not be difficult because they will have an easy communication. AVON model of Sales Leadership is applied in the host country wherein leaders ensure that each representative benefit from participating in the team and their competences, diversity and insight as members are developed and understood. In this culture, members build a social network that is built on trust and knowledge that each member works for the success of their own team. According to Vance & Paic (n.d.) HCN model increases the absorptive capacity of the participants as they are given orientation, entry job skills, study of the language, understanding of the home country culture, supervision and technical operations management and strategy. Hiring and retaining the best workforce in the countries noted below. Whenever there is a decentralized branch, Avon hires a district sales manager or zone manager who then trains the representatives. In the international setting, majority of Avon’s staff are women, and most of the independent sales representatives are women. Some of the employees in the host countries are hired as employees while others are considered independent contractors. The hired employees are paid salaries and incentives based on the achievement of the set of objectives of the district. Independent contractors earn commission based on the total sales of the district or their down lines. Services of representatives are engaged thru recommendations from personal contacts, referrals from existing representatives or thru responses from advertising campaigns. As of December 31, 2009, AVON employs 41,000 employees, 6,000 of whom are in the U.S. and 35,000 are in other countries (Avon Annual Report 2009). Building company associates Avon developed a Sales Leadership program which is a multi-level compensation plan that gives the Sales Leadership Representatives an opportunity to earn bonuses based on the net sales made by representatives aside from the discounts they earn from their own sales of AVON products. A sales leader representative is allowed to receive commissions up to three levels of his down lines. A sales leader representative has the responsibility of prospecting, appointing, training and development of their down-line representative. The Sales Leadership Representatives model follows the standardized global procedure of activities designed by AVON. Since AVON considers the representatives as the company’s store, it has become to be its major concern to recruit, retain and service representatives on a continuing basis so as to maintain and grow the business (See Avon case study) A best work force is described as those having intellectual capability, psychological capacity and social capital. Intellectual capability is having the knowledge, skills and cognitive ability; psychological capacity refers to understanding cultural differences, and social is the ability to build trusting relationship with stockholders. As such, a best workforce is always attracted with compensation package and HRM policies of a company. Avon believes that their policy of hiring sales people through their Sales Leadership Plan will work in retaining the best workforce wherever their subsidiaries are located. It will be the same policies the company employs be it in UK or in African country. Avon maintains one formula for compensation plan; that is to sell Avon’s world class beauty products to build a customer base; share Avon’s great opportunity with others and then show others how to do the same to you. On this, a representative has an opportunity to earn 50% on his personal sale and up to 12% from the team’s sale. The role of cross cultural training and practices Cross culture is described as interaction of people from different backgrounds in the business world. It is a vital issue with AVON because of its international business whose success will depend on the smooth interaction of employees and sales representatives from different cultures and regions. As such AVON is committed to train their representatives to interact effectively with others and also with their customers to have a cross-cultural experience. One experiences a cross culture difficulty when he is transferred to another location in another country, and this becomes more difficult to a manager, who cannot effectively communicate or understand their employees’ actions immediately. Here we see the role of cross cultural training in adapting to the culture of the employees. Cross culture could also be seen through a pattern that describes differences. For example, the study of Stahle & Erwee drives the point that there is a culture differences between countries when it comes to HRM practices that is applied to work organization, skill formation, compensation systems, employment security, staffing and corporate governance. Part 2. Dealing with culturally diverse workforces UK and South Africa are two of the countries being served by Avon Products. These two countries, far apart from each other have diverse culture which means having complex elements that have a range of visible and invisible elements. These elements could be people, investments, areas and many other groupings that have variety. In this study these are elements about people categorized as to religion, ethnicity, literacy, sector preferences, population and language. This study will present the cultural differences of UK and South Africa and compare and contrast the cultural diversity of these countries that may affect operations of Avon. It will be compared with the culture of the United States as this is the home base of Avon. Six cultural characteristics have been chosen for comparison as they may represent significant differences that need to be addressed to in hiring of Avon sales representatives in these countries. Culture South Africa is a multi-racial society that is distinguished by the Afrikaners and British -descent cultures such that they would not be happy to be confused with one another. The South African constitute of white Afrikaner, black African, Indian, Cape-Malay and other communities, such that there would be a difficulty in inter-acting with them; racial and ethnic divisions make it to build teams which cross these boundaries. (Worldbusiness.com) It has been reported that South Africa is the wealthiest country in Africa but has a male life expectancy of only 45 years due to epidemic of AIDs. The biggest change in its government is abolition of apartheid policy and the integration of a new cadre of black professionals into most companies. The new breed of managers, World.com said are able to make corporate progress through use of affirmative action programs where companies have actively sought to develop a more representative and racially diverse management system. However, the female participation in senior management level is seen to be low. As shown in World.com, a pervasive “macho” culture exist such that women can expect to be treated with less respect than men Because of the multiple cultures in South Africa, numerous languages are spoken in the country. So far, there are 11 languages recognized official by the governments, and only the Afrikaans is the English speaking people. Nevertheless, foreign visitors should not worry because English has been declared as the language of Commerce (CIA World Factbook). In business meetings, it is enough to shake hands, while a woman barely does the shaking of hands, and nodding of head is just enough way of greeting. Meeting starts with preliminary discussions of trivial matters about health, family, leisure or sports, and rushing down to business is considered as ill-mannered. Business cards exchange is a normal practice and is surrounded by small pleasantries such as giving a polite comment. South Africans are deep rooted in their tradition and often appreciate hearing about the background of the company and the person with whom they are transacting business with. They also follow the European approach to speaking and would like to have space while talking, they do not appreciate touching and the like. The United Kingdom The United Kingdom is comprised of four countries, England, Scotland, North Ireland and Wales. These countries are separated by geographical locations and the people here feel a strong feeling of idealism and identity in the country where they belong. According to CD Network, British are formal people; the young and the old follow a different style of doing business. The old follows the tradition of working with people or companies they know or known by their friends and neighbors, while the young has no qualms about this. Younger business people do not consider a long-standing personal relationship before they do business with people and do not require an intermediary to make business introductions, but networking and relationship building are often found to be key to a long term business success. (CDnetwork). Business culture of UK respects the rank, at most, businesspeople prefers dealing with people at the level. In making transactions, British prefer, if possible, to include an elder statement on the team because they believe that this presence will give an aura of authority to begin a good business relationship in many companies. The United States In business, United States is particular about dress code, punctuality, business hours, greetings and introductions. As a general rule, dress code requirement is formal dress or at times, uniforms. Other companies require an employee to dress up relevant to position. Business hours is from Monday to Friday, and a regular 8 hours work. Americans value punctuality and coming in late for an appointment creates a negative impression for the business proposition. Greetings are through handshake, and addressing names has a protocol. A senior officer is usually addressed as Mr. (surname), but a co-equal is permitted to be called by first name, but not nickname, like Miss Maria for co-employee, and Mr. Johnson if he is a senior. In comparisons of business culture done by World business culture.com, they describe US. Business culture as something that is individualistic because managers are accountable only on decisions made within their area of responsibility. It is seen from this culture that although there are discussions on matters are done in meetings; decisions still lies in the boss. It is therefore mindful in US business culture to disregard opinions of subordinate, a characteristic that differentiates US from other compromise oriented cultures. From Table 1, the diversity of cultures of United Kingdom, South Africa and United States are defined. In religion, all three countries have mixed religion. As to ethnicity, UK has 92% white population, US has 79.96 white, and South Africa with a dominant black population. As to literacy, US and UK have the same 99% percentage of literacy while South Africa has 86.4% literacy rate of their population. As expected UK and US are proficient in English as this is their mother tongue, while only 9.4% of population speaks English in South Africa. Labor is more concentrated in service sector as shown in UK 80.4%, US 76.7% and South Africa 65.8%. There is a big number of labor in U.S. of 154.9 million followed with a big gap of 31.45 million by U.K. and 17.32 million in South Africa. (CIA World Factbook) Implications of diversity for cross-cultural communication and leadership. It has implication in the cross cultural communication and leadership as members of the AVON team will strive to live within the cultural bound of their society and should be able to quickly adapt and embrace the culture of the society to succeed. For example in the business culture as observed in South Africa., they are conscious of proxemics as they would like to maintain some space while talking. Mike Sheppard (n.d), defines proxemics as a personal territory wherein public, social, personal and intimate spaces as a form of non-formal communication identified only by culture. As taken from Sheppard studies, his calculations of personal territory as normative calculations of the Americans showed the following: Public space ranges from 12 to 25 ft, a distance maintained by a speaker (the President, for example) and the audience. Social space ranges from 4 to 10 ft and is used for communication with business associates Personal space ranges from 2 to 4 ft and is used among friends and family members Intimate space ranges from up to 1 ft and is used for whispering and embracing. (Sheppard) Let us take a look on how personal territory is applied to business. In UK and US, we will find that social space does not really matter because their social space equates to personal or intimate space. It differs in South Africa as interpersonal communication needs a social space of 4 to 10 ft. So during the negotiation, leaders should be cognizant of the allowable space for conversation as culture so provides. Language will not be a problem of leaders with UK and US, but training will be required in South Africa, as it has adapted multi-languages in their culture. Because of ethnicity, the government has recognized several languages to be used and therefore a leader, if he is an expatriate will have to study the language or get an interpreter. Language becomes a problem to South Africa because if the expatriate does not understand the language he needs to build the trust to the interpreter who will underwrite negotiations in English language. In this sense, leadership training of inter-cultural communication with South Africa should include cultural diversity, careful coding and decoding of messages and appropriate follow up. Sending expatriates and employing HCN locals have both benefits, Maali (1999) points to the difficulties of expatriates such as he should develop cultural empathy, meaning, “he should have the ability to respect beliefs, values and behaviors and business practices of individuals and groups”. The expatriate should be able also to understand the external environment of the assignment in the host country, and last, he should have inter-personal skills of verbal and non-verbal communication so he can communicate and build the trust on him. Whereupon, when hiring HCN locals, all of these are not necessary except the HCN local understanding of the culture of the organization at the main office. Part 3. Impact of social institutions in India to Avon’s IHRD plan in India Aspects of social institutions that have impact on Avon’s plan are regionalism, language, religion and caste factors, fatalism and collectivism. Table 3 on Annex 1 shows India’s cultural diversity. Regionalism is found to be prevalent in India. It is a situation wherein different religious or ethnic groups with distinctive identifies co-exist within the same state boundaries and sharing a strong feeling of collective idealism. Data collected from research show that there is a mixed religion and ethnicity in India, however, Hinduism as religion is practiced by most of Indo- Aryans. Due to the mixed ethnic groups, a variety of languages is spoken in India. Hindi is spoken by 41% of the population, and other languages are spoken in small percentages by the people. However, English is the adapted language used for official communications and business transactions in the government and in national and political communications. India is known for its religiousness, spirituality and philosophy, and the birthplace of some religions existing today. Statistics show that the most dominant religion in India today is Hinduism wherein 80.5% of Indians are Hindus. Hinduism is a colorful religion with a vast gallery of Gods and Goddesses, and is one of the ancient religions in the world. Concepts of loyalty, identity, faithfulness and personhood are imbedded in religion. Caste factors. The Indian caste system is a way of life used by the Indians for many years. It has kept a sense of order and peace among the people as their roles were defined and classified according to their function, occupation and economic place in society. Although this is no longer in place in today’s Indian society, much of its culture has been retained and observed. A case in point is the way Indians approach business. According to my research, Indians are responsive to regionalism or personal territory such as space, and business etiquettes. They are also sensitive to the rank and position of a person. When doing business or talking to business associates, they should be addressed as “Doctor” or “Professor” if there is a title, or Mr. and Miss, if there is none. Because of the influence of the caste system, Indians are used to the hierarchy of positions in the workplace where seniority is respected, obeyed and followed. Caste factor is also shown in masculinity/femininity data. Statistics show that male outnumber the female in India and this imbalance has continued over time. Data also shows that there is inequality in employment as there is a higher ratio of male employment. According to studies of Zhang and Takur, women inequalities are brought by centuries of tradition of economic and religious beliefs. However, it is gathered that today, women in business are very common in India and they should be treated with respect. One common rule in India states: “Do wait for a female business colleague to initiate a greeting whether it is verbal or physical. Indian men do not generally shake hands with women out of respect” Collectivism. Collectivism is a cultural trait found in Indian because they find strength in working together as teams. Indians do this even when eating, as they eat lunch together in office. They are accustomed to living in one roof and adhere to the concept of smaller personal space. In doing business in India, collectivism places an added value in making interpersonal contacts, conflict is avoided and there is more direct approach to communication. Conclusion Findings of research show that in host adaptation, the key to doing business successfully in India is finding good partners who have local knowledge of the local market and procedural issues. It would not be hard to find women representatives in India because women here are more interested in business, have more patience, diligent and committed. Hiring host country nationals is more of an adaptive process for Avon because it limits barriers to entrance to the market because of cultural diversity. When it comes to recruitment selection process, the direct selling model of Avon works well in other regions, and there is no cultural diversity in the procedure of hiring representatives. Avon uses uniform strategy everywhere and internet website wherein all interested applicants can apply. Hired locals need training and development because research findings showed that employees from HNC find it difficult to understand the home culture of the main office. Although there is a linguistic mix, English is being used in business, and literacy is high. This means that training representatives will not be difficult because of high literacy. India is known for its IT advantage and it is presumed that most are computer literate. With regards to national and institutional context, options include using a subsidiary relationship, a joint venture with an Indian partner, or using a liaison, project, or branch office. As to preferred leadership, India and United States differ significantly. The research finding showed that Americans prefer individualism. U.S. ranked number one when it comes to individualistic culture. They prefer clarity in their conversations and go direct to the point. India, on the other hand likes collectivism wherein a great emphasis is on the “we” culture. w.c. 4150 Annex 1. Table 1. CULTURAL DIVERSITY OF UK AND SOUTH AFRICA AND UNITED STATES Diversity United Kingdom South Africa United States Religion Predominantly Christian Mixed religion, 11% has no affiliation Majority are Protestants Ethnicity 92% white 79% Black 79% white Literacy 99% 86.4% 99% Labor sector preference Services 80.42% Services 65.8% Services 76.7% Population breakdown More male More female More female Language English Mixed, only 9.4% speaks English English Labor force 31.45 million 17.32 million 154.9 million Source: CIA World Factbook Table 2. India’s cultural diversity Category Diversity Religion Mixed religion, Hinduism predominant, 80.5% Ethnicity 72% are Indo-Aryans, Dravidian 25%, others 3% Literacy 61% of total population is literate, 73.4% male; 47.8% female Population 1,189,172,906 (2011 est) Labor force 478.3 million, more male population employed Labor force by occupation Agriculture – 52%, industry – 14% and services 34% Language Mixed languages are spoken,41% of population speaks Hindi. English is a subsidiary official language spoken in national, political and commercial communication. Source: CIA World Factbook (2011) Table 3. India’s cultural diversity Category Diversity Religion Mixed religion, Hinduism predominant, 80.5% Ethnicity 72% are Indo-Aryans, Dravidian 25%, others 3% Literacy 61% of total population is literate, 73.4% male; 47.8% female Population 1,189,172,906 (2011 est) Labor force 478.3 million, more male population employed Labor force by occupation Agriculture – 52%, industry – 14% and services 34% Language Mixed languages are spoken,41% of population speaks Hindi. English is a subsidiary official language spoken in national, political and commercial communication. Source: CIA World Factbook (2011) ‘References Ashamala, Maali. International Human Resource Management Practices: the Challenge of Expariation. CR Vol. 8, 1998, p. 55. Avon Annual Report 2009 Avon Case Study. Chapter 10. Developing a Global Management Cadre. Part 4. Global Human Resources Management, pp. 389-391 Callaham Terence and Pavich Roxanna. 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